County voters face $11 million bond decision

Washington County residents will have to make some tough decisions at the November 4 election polls when faced with whether to vote for a $11 million general obligation bond to bail out the county's government. The bond issue and the proposed county budget for 2026 would result in about a 40% hike in county taxes for municipalities. At a public hearing held on August 21, the Washington County commissioners outlined the reasons for what has quickly become a crisis and the need for the bond.

Commission Chair David Burns and commissioners Billy Howard and Courtney Hammond, all new to the office, prepared a synopsis of the county's financial problems. County Manager Renée Gray took over in January 2024 from Betsy Fitzgerald upon her retirement. The county treasurer is an elected position held by Jill Holmes since 2000. Burns explained that Holmes is on unpaid personal leave with health benefits still in place and will retire at the end of the year. Since the meeting, Holmes has resigned as treasurer.

Reading from the prepared statement, Burns stated that in 2019 the previous commissioners, Chair Chris Gardner and commissioners Vinton Cassidy and John Crowley, enacted a policy for the treasurer's office to follow to "treat any carryover amounts from a department budget in the following manner. Any entry will be carried over into the next year's budget in the corresponding line. This practice will become effective in the 2020 budget year and continue thereafter."

However, uncaught by anyone, including the commissioners, the county budget committee, the county manager and the treasurer, was the fact that the practice "did not take into consideration overspent line items or under collected revenues," the commissioners stated. The previous commissioners used what they thought were available carryover funds to lower the amount of the funds to be raised by taxation from the county's municipalities and unorganized territories (UT).

Compounding the problem was the shortage of auditors in the state. The county, like many municipalities and school systems, has had trouble finding auditors to carry out the legal mandate to have an audit conducted annually. The books were not audited for the years 2020 through 2024. The county had also been the recipient of $6.1 million in federal ARPA funds, which Gray notes were kept in a separate bank account. However, the commissioners' statement explains that in the budget "the ARPA funds were transferred to the general fund to be used for cash flow, until the tax anticipation note (TAN) could be established by February of each year." The ARPA funds were eventually designated for the new county courthouse, and the project was completed and paid for in 2024.

The end result was overspending in the budget to the tune of about $7.6 million for the 2025 TAN, the unaudited back deficit of $2.6 million and the projected 2025 cash shortfall of $700,000. Burns noted at the hearing that when the county was finally able to contract with an auditor in 2024, they quickly became aware of a problem with the accounting in 2021, the year they were starting their audit on. The county government was alerted in August 2024, and the auditor started to do a quick review of the following years to see if the problems were compounding in the same manner. They were. The actual amount of the deficit will not be known until all the audits are complete. Burns said, "It changes as the auditor goes through each year." The auditor has completed 2021 and is almost finished with 2022.

"The bond seems to be the best option," Burns said. Howard added, "There are going to be extremely trying times." Hammond said that the commissioners are going through the 2026 budget line‑by‑line, "looking for the best option to move ahead -- trying to clean up the mess that was left to us."

Questions raised about blame and bond passage

At the hearing, many members of the public in attendance questioned who was to blame, with attorney Jeffrey Davidson of Machias pressing the commissioners for an answer about the role of the treasurer, who is bonded. Burns stressed that the commission was not saying the treasurer was to blame, that "a lot of eyes looked at it [the budget]." Maine law specifies that "the county commissioners are responsible for the proper financial administration of each county department or agency and for approving county expenditures."

Maine law also requires that an audit must be done annually. In October 2024 The Quoddy Tides reported on the auditor shortage around the state, with the Maine Department of Education stating that in 2014 there were about 65 firms conducting audits in Maine. A decade later there were only 19 firms, with some towns having their audits done by companies located as far away as California. Among the reasons for the decrease were a number of retirements during the pandemic; the elimination of high school accounting courses, with fewer students going on to study accounting in college; and a difficult peer review process, which is required of firms every three years.

When the county commissioners approached the state auditor recently about assistance with the county audits, Gray reported in a separate interview, "The state auditor has stated they are entering into the state's audit process and therefore cannot assist Washington County with audits. That means we have to continue with our current CPA, who is currently working on the 2022 audit."

When questioned about what would happen if the bond is turned down by the voters, Gray explains, "There really isn't a good plan if this bond referendum doesn't pass. The 2025 tax anticipation note will not be able to be paid to the bank, Machias Savings Bank. When I spoke with MSB, I was told it's really not an option to not pay the TAN. Our bond counsel indicated perhaps we could negotiate, but it didn't sound like an option from the bank."

Gray continues, "If the bond doesn't pass, the TAN doesn't get paid, the county doesn't get a new TAN in 2026 to provide cash flow to operate until the county tax money for 2026 comes in from municipalities, generally in August and September of the year. Operation costs are payroll and accounts payable. Folks that work for the county won't be able to get paid and, therefore, could potentially leave to find jobs that pay. The most valuable asset the county has are its employees, without whom the county cannot function. This means jail, RCC, sheriff patrol, district attorney, registry of deeds, probate court, emergency management agency, finance just to name a few."

The commission was scheduled to hold another public hearing on Thursday, September 11, to present the proposed 2026 budget to the county budget advisory committee and to discuss the bond referendum question. In addition, Maine law requires the commissioners to hold public hearings about the bond in each commissioner's district. These will be scheduled in the coming weeks.

Bond amount, municipal tax implications

The bond itself, at $11 million, is expected to have a 6% interest rate, which will generate the additional cost of $3.65 million in interest over a 10‑year lifespan. The commission hopes to pay off the loan before the 10 years is up, with Gray explaining that changing the county's calendar year to a July 1 fiscal year, which is how most municipalities operate, would reduce the need to borrow funds to pay for the county's operations during a gap that is currently from January through September to just the period of July through October. The commission is also considering county‑owned real estate that could be sold to raise funds. Burns stressed that in the future the commission will be taking a hard look at what the county provides in services and making some decisions about what is realistic and what is not.

In a spreadsheet provided by the county, estimates of tax increases by municipality – if the $11 million bond is passed and the 2026 budget as proposed at the August public hearing is not reduced – range from $5,888 to $384,983. For example, Calais' county tax would increase from $473,279 to $671,861, or 42%. Charlotte's tax would increase from $90,253 to $128,121, and Eastport's tax would jump from $400,919 to $569,139. For other municipalities, the increases would be: Lubec – from $525,466 to $745,945; Machias – from $389,780 to $553,326; Pembroke – from $199,626 to $283,387; Perry – from $262,338 to $372,412; Robbinston – from $117,530 to $166,844. The UT's tax would increase from $917,526 to $1.3 million.